Thursday, January 19, 2017

Why is the redemption of the Zodiac by Saffron was writing – The Echoes

The offer to purchase of Zodiac Aerospace Safran is not only the most important operation for the consolidation of the French aeronautical industry since the merger of Snecma and Sagem in 2004. It is also a chapter of its history that is about to unfold, with the absorption of the Zodiac, a company founded in 1896 whose main shareholders, the distant descendants of the founders, have always posed as defenders of the family heritage.

This is the name of the preservation of this heritage that this hard core of family shareholders, led by the chairman of the board of directors, Didier Domange, had curtly rebuffed the advances of Saffron in 2010, saying they wanted to remain independent. the ” We don’t need a partner, said at the time the chairman of the executive board Olivier Zarrouati, in an interview with “les Echos”. in Zodiac has demonstrated its ability to grow without the help of anyone, and we have opportunities to continue as well. “

industrial Crisis

Six years later, the discourse has changed. the ” We need a cooperation “, was recognized on Thursday, Didier Domange, during the press conference announcing the proposed merger with Safran. the ” We have not sought out other partners ; Saffron seemed to us to be the best possible “ he added, while emphasizing the desire of the family shareholders to continue to ensure that the interests of Zodiac, through a shareholding of 9.8% in the capital of Saffron and two seats on the board of directors.

if so is it passed in six years that the reference shareholders of Zodiac Aerospace to give up their independence ? The first explanation that comes to mind is the industrial crisis in which it is debated Zodiac Aerospace for nearly two years, with an accumulation of delays in deliveries of aircraft seats and cabin facilities, which have driven the results, and have greatly tarnished the reputation of the company. Since the beginning of the crisis of the seats, in the spring of 2015, action Zodiac has lost up to 60 % of its value and, despite the recovery underway, she accused, still a discount of 25 % on the eve of the announcement of the TAKEOVER.

Grumbling shareholders

Several groups of shareholders have announced their intention to send a yellow card to the officers of Zodiac Aerospace on the occasion of their general assembly, which meets this Thursday. Doubting of the promises of the direction of a return to normal production by the end of 2017, some were calling for, in particular, that a recovery solution is being examined. There is no doubt that the TAKEOVER of Saffron, which has propelled the title of 22 % on the stock Exchange at mid-session, should give them entire satisfaction. In addition to the price offered by Saffron 29,47 € per share (as against 23 euros the day before), Saffron should help Zodiac to solve its industrial problems more quickly and recover more quickly a return to double digits.

Consolidation in the market in the United States

However, even without this crisis, the backing of the Zodiac to Saffron would have made sense sooner or later, under the pressure of its environment. Since the beginning of the decade, the time is in effect to the consolidation among equipment manufacturers, to cope with the increasing pressure from Airbus and Boeing on price, and the costs of more than the higher of the new aerospace programs. And in this race, the major oem’s, americans have taken several lengths ahead of their european competitors.

In 2012, the group United Technologies (UTC), parent company of engine manufacturer Pratt& Whitney, was so absorbed by the oem Goodrich, giving birth to the first global automotive supplier, with a turnover of 25.4 billion dollars, just in the aerospace sector. In early 2016, a new warning without costs came overseas with the announcement of a proposed merger aborted between UTC and Honeywell. In case of success, the marriage of these two conglomerates, active in the aerospace and other sectors, would have given birth to a giant industry of nearly $ 100 billion in sales..

But the most significant for Zodiac is the announcement, in November 2016, the repurchase by the oem american Rockwell Collins, its main competitor on the market of aircraft seats, B/E Aerospace, for $ 8.3 billion. A new set of 7.1 billion dollars, concurrent front-end of Zodiac Aerospace and its 5.2 billion euros of sales.

Staying the course

in the Face of its american giants, Zodiac began to make a figure of a dwarf, with the risk of finding themselves quickly marginalized in the major tenders, in the face of manufacturers determined to obtain between 10 % and 15 % cost reduction with key suppliers. Lack of new program, the market shares cannot be acquired by lower costs. And, in this field, Zodiac Aerospace, already in delicacy with its biggest customers, was clearly not in the best position to impose.

The integration in the Safran group, if it does not solve all of the problems, should at least help to reduce the costs and to have more influence on the world stage. With the range of Zodiac, Safran can now offer a global offer, not only to the aircraft manufacturers, but also to the airlines. The new French champion could even become a center of consolidation for the aerospace oems europeans, still very fragmented. Provided, however, that the growth dynamic that has made the success of the Zodiac in the course of the last thirty years do not disappear in the new array.